Canada Targets Banks With Risk-Sharing Plan as Housing Booms
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Finance department releases proposal for mortgage risk-sharing
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Government proposes two programs where banks would pay more
Canada’s banks could see their costs rise by as much as 30 basis points under government proposals that would force them to take on a greater share of mortgage defaults, as policy makers seek to engineer a soft landing in the country’s housing market.
The estimates, contained in consultation documents released Friday by the country’s finance department, outline two ways banks could shoulder more of the burden from defaulted home loans in the country’s C$770 billion ($525 billion) insured mortgage market. In a “first loss” approach, lenders would be responsible for a fixed portion of an outstanding loan at the time of default. Under a “proportionate-loss” scenario, banks would pay a percentage of the total loan loss…
Canada Targets Banks With Risk-Sharing Plan as Housing Booms
